The imperative for 21st century business leader is to learn how to make the mind-set shift required for capturing the gains of disruptive change. Old mental models and tools of the past are ill equipped to comprehend and thus capture the opportunities created by disruptive change.
A mindset is a set of assumptions, methods, beliefs or way of thinking that determines one’s or a groups thinking, behavior and mental attitude. Every mind-set is correct in its own world, but the problem is that an old mind-set may not “connect” with the emerging new world.
The 21st century is ushering in an era of disruption fueled by digital technology that is connecting everyone to everything. Learning is accelerating faster than ever before because knowledge no longer exists in a vacuum. Once contained by barriers to access information now flows freely across human networks transforming information into new knowledge. Knowledge is growing faster than ever before in the history of mankind. We are now just beginning to understand that our past assumptions do not fit the disruptive realities of the new world.
Consider the Disruptive Systemic Shifts
Over the last twenty years dramatic changes have disrupted markets, governments, the global economy and society. On a macro level these changes have been driven by the following categories of disruption:
- The explosive growth of the internet and the digital world: Living in a connected world
- Social media gains more influence than traditional media: Human vs. Institutional
- The S&P 500 Index valuations shift: From tangibles to intangibles
- Displacement from innovation: Disruptive innovation; industries, businesses & products
In a McKinsey & Company Quarterly article titled Measuring the full impact of digital capital the author’s state: “Above all, we want to emphasize the importance, for many business leaders, of making the mind-set shift required to embrace the importance of digital capital fully. The disruptive nature of digital assets is intensifying in markets such as search, e-commerce, and social media (where attackers can build business models with near-limitless scale). Disruptive digital assets are also important in segments where behavioral data and user participation can be monetized, by defining entirely new business opportunities or fostering breakthroughs in collaborative innovation. Companies that deploy these assets have the potential to threaten large existing profit pools thanks to the challengers’ vastly different economics or radically new ways of doing things.”
The McKinsey article was in response to the recent the US Bureau of Economic Analysis released, for the first time, GDP figures that included more intangibles in their calculation. Note that the four categories of disruptive systemic shifts are all elements of intangible capital. What this represents is the “systemic nature” of intangible capital which fuels all value creation for businesses, markets, governments and economies.
Mary Adams, CEO of Smarter Companies, has created taxonomy of elements that make up the system of intangible capital with four primary components being human, strategic, and structural and relationship capital. McKinsey speaks to digital capital as an important intangible asset but it is only a part of the intangible system and without the other pieces the economic value added possibilities are limited.
While McKinsey says “we want to emphasize the importance, for many business leaders, of making the mind-set shift required to embrace the importance of digital capital fully”….I would say the emphasis needs to be on the mind-set shift required to embrace the importance of intangible capital fully as a system rather than a silo.